Beef price outlook at long-term normal, but unexpected news can change prices

Cow Calf

“Why do you hang on to your calves?” the beef economist asked cow-herd owners in the room.

Scott Brown answered his own question: “Because their price is going up. Right?”

Brown, with University of Missouri Extension, cautioned, “There are still downside risks.”

The risk remains in spite of slowing of sharp price declines since October. Some stability appears in beef prices.

“Unforeseen events cause volatility,” Brown reminded the gathering of producers of Show-Me-Select replacement heifers. “Market shocks occur in response to the news.”

He gave an example. A release of the USDA cow inventory Jan. 31 might contain surprises, Brown said. “If cow numbers are sharply higher, that could cause a drop in beef prices.”

“I get arguments in both directions, up and down, on cow numbers,” he said. However, he admitted he thought there would be more cows reported in the U.S. herd. One reason is continued holding back of more heifers.

Brown had already explained that there is a mountain of meat—pork, chicken, and beef—facing U.S. consumers.

A growing cow herd will only add to the supply of beef to be sold.

News after the cow count release could drag markets down. “You might consider future downside risks when deciding when to sell calves,” Brown said.

However, when he asked herd owners if they increased their herds, few held up their hands. “I could be wrong on a growing cow herd,” he said.

Brown went on to explain that international trade plays a big part in the price of domestic meat. Trade policy and value of the dollar both affect that foreign trade.

“Recognize that those changes affect your marketing decisions,” he said.

A strong dollar makes prices higher in other countries for buyers of U.S. beef. “If we can’t sell beef abroad, that means that meat must be consumed here at home,” Brown said. “The main way to move more meat is to lower prices.”

As always, Brown urged producers to consider risk management in their marketing.

In his overall outlook on cattle prices, Brown said, “We may be returning to what is a long-term normal price level.”

Managers must realize that input expenses don’t adjust down as quickly as market receipts.

Brown reminded producers that weather is a big player in determining the size of the cow herd. Drought, especially in the south-central plains, started the huge drop in cow herd size that led eventually to record high cattle prices in 2014.

Changing economics affect individual farm decisions. Major events affect all of agriculture. Price swings in commodity prices make for planning headaches for beef producers.

“It’s a series of unforeseen events that caused recent volatility,” Brown said.

The Show-Me-Select heifer producers follow management and genetic guidelines developed at the University of Missouri. Protocols, such as for calving ease, add value to heifers coming into the herd.

Heifers with proven genetics add price premiums to replacements sold in the annual spring and fall heifer sales.

Brown tells beef producers that adding quality is a form of risk management.

Repeat buyers at the sales learn that heifers with better genetics outperform old cows they replace. Return buyers bid more at the next sale to buy quality.